I am 30 years old. My net monthly salary is Rs 75,000. I will be getting married soon. My parents are independent . My fiancé's net salary is Rs 3 lakh a year. Monthly rentals and groceries cost me Rs 30,000. Entertainment and other expenses are Rs 9,000. To meet my marriage expenses of Rs 2 lakh, I save Rs 5,000 monthly in a chit fund. I have a monthly surplus of Rs 12,000.After my marriage, I expect it to increase to Rs 37,000.

I have an education loan outstanding of Rs 2.5 lakh with an EMI of Rs 9, 000 a month.

I have a life insurance policy for Rs 5 lakh, whose annual premium is Rs 20,186 and it will mature in 2032. I have taken a term insurance for Rs 50 lakh and my annual premium is Rs 5,000.

I have three SIPs of Rs 3,000 each, which includes a gold fund. The balance in MFs is Rs 60,000, all in ELSS schemes taken last year. My PPF balance is Rs 1 lakh and I have fixed deposits for Rs 50,000. I have accumulated 10 grams of gold.

Goals: I want to buy a car for Rs 9 lakh by 2014 and construct a house for Rs 75 lakh by 2017. I plan to have one child and wish to provide for his/her education.

I want to retire by 58 and wish to travel once in three years to nearby countries with my spouse .

- R. Srinivasan

Financial planning is all about budgeting, prioritising goals and taking a realistic approach. For example, retirement, being a long term goal, even small amounts saved for many years will add up to a sizable corpus due to compounding.

Often, we come across individuals who buy traditional insurance plans for 15-20 years with high premiums.

In the earlier years of your career, you will or should have a higher risk appetite and should invest in risky assets such as equity. This may be done either directly or more preferably through mutual funds to create wealth. In your case, you have adequate term insurance, but again you are paying Rs 20,000 for traditional plans.

At this stage of your career, you can build an aggressive portfolio with 70 per cent in equity, 20 per cent in debt and 10 per cent in gold. You should also have savings in EPF. As your tax slab is 20 per cent, you need to create only an emergency fund through debt investments.

Car : To accumulate Rs 5 lakh, you must save a sum of Rs 19, 380 a month in RD with post tax return of 7.5 per cent.

House : If you want to buy a house for Rs 75 lakh after five years, you need to fund at least 20 per cent of it. Since your goal is five years away take aggressive exposure of 70: 30 in equity and debt.

With this combination, you are likely to achieve a return of 12 per cent. To reach Rs 15 lakh you need to save Rs 18, 000 a month. Earmark your current MF SIP savings towards this goal. Additionally, you need to save Rs 9, 000.

Since you already have large-cap funds, add mid-cap funds such as HDFC Midcap Opportunities and IDFC Premier Equity to prop up the portfolio returns. Do book profits during exceptional market rallies.

Retirement : Until you settle down after marriage, arriving at a likely monthly expenses figure will be difficult. But for calculation purposes, we have assumed household expenses of Rs 3.6 lakh a year.

If the same is inflated at 7 per cent, at 58 your annual living expenses will be Rs 24 lakh. This means that at retirement you should have a corpus of Rs 4.7 crore and it should earn a return of a percentage point over and above the inflation to meet your needs till you turn 80.

To reach the target, you should save Rs 17,230 a month and it should earn 12 per cent. But your current surplus is only Rs 6, 000. As and when your earnings improve or after you buy a car, increase your savings towards retirement.

For child's education allow your current lump sum investment in MF to grow to meet the initial schooling expenses. Once your education loan is repaid, start saving for you child's needs. Overseas trips can be planned based on your income surplus as you climb up the corporate ladder.

Send your queries with contact number to fp@thehindu.co.in

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